Error Reduction in Distributed DSS Through Coordination of Modeling Activities: Simulation Study

It is well known that the “lemon” problem can cause market failure. Because difficulties in quality discovery of nonstandardized and complex products will increase transaction costs, it was predicted that the “electronic market” would prevail only with less complex and more standardized goods. However, it has been observed that there are many successful electronic (auction) markets for seemingly typical “lemon” goods such as used cars, raw minerals, and agricultural products. It is argued that in such markets, the equilibrium price of electronic trading appeared higher than in the nonelectronic market. Many speculative explanations have been offered for this, but to the best of our knowledge, no analytical studies have been presented. This study is an attempt to fill this gap. In this paper, we look at the problem of quality discovery in the electronic trading of physical goods especially when the goods are not standardized. The information asymmetry between buyer and seller creates the possibility of a “lemon” in the nonstandardized market. To mitigate this problem, several auction markets have devised third party quality grading systems and limited auctions to only relatively higher quality products. Through analytical modeling, we rationalize these mechanisms; that is, the intervention of an impartial third party for quality inspection, market segmentation by quality measure, and the sellers' willingness to pay the cost of quality inspection.     

Algorithmic market making in dealer markets with hedging and market impact

In dealer markets, dealers provide prices at which they agree to buy and sell the assets and securities they have in their scope. With ever increasing trading volume, this quoting task has to be done algorithmically in most markets such as foreign exchange (FX) markets or corporate bond markets. Over the last 10 years, many mathematical models have been designed that can be the basis of quoting algorithms in dealer markets. Nevertheless, in most (if not all) models, the dealer is a pure internalizer, setting quotes and waiting for clients. However, on many dealer markets, dealers also have access to an interdealer market or even public trading venues where they can hedge part of their inventory. In this paper, we propose a model taking this possibility into account therefore allowing dealers to externalize part of their risk. The model displays an important feature well known to practitioners that within a certain inventory range, the dealer internalizes the flow by appropriately adjusting the quotes and starts externalizing outside of that range. The larger the franchise, the wider is the inventory range suitable for pure internalization. The model is illustrated numerically with realistic parameters for USDCNH spot market.     

The Issue of Insider Trading in Law and Economics: Lessons for Emerging Financial Markets in the World

Growth of the private sector and privatization of state companies around the world have led to the emergence of various stock markets, some of which are depicted by insider trading. Law literature uses the arguments of unfairness, breach of fiduciary rights and damage to others to define and rule against insider trading. Economic literature can be used to interpret insider trading from other perspectives. This study argues that the question of insider trading in developing markets can be resolved by the extent stock markets generate externalities and are public goods. It advocates structural changes in the developing markets and examines the conditions under which the Coase Theorem would work.     

International Sales Negotiations:

Successful business negotiation in global markets requires effective cross-cultural communication between buyer and seller. Building on a growing body of literature, this paper develops a four-step, funnel-like model of international sales negotiation. This bi-directional framework traces the communications flow from broad non-selling issues to specific aspects of the international sales transaction. The four stages—non-task related activities, information exchange, persuasion, and adjustment—are then discussed individually. Finally, directions for future research in the area of international sale negotiation are presented.     

The liquidity effects of foreign exchange intervention

This paper examines the effectiveness of foreign exchange intervention in a two-country, two-currency, general equilibrium model that allows for liquidity effects. Both sterilized and non-sterilized intervention operations have significant impacts on the allocation of liquidity in international financial markets. Whether intervention is successful in moving the exchange rate in the desirable direction depends upon the degree of sterilization of intervention and the intratemporal elasticity of substitution of the consumption goods. The model shows that there exist circumstances in which the response of exchange rate to intervention is ‘perverse’ as documented in the empirical literature.     

Investigating the effect of customer-generated content on performance in online platform-based experience goods market

As COVID-19 persists, a new normal has emerged in our lives and consumption patterns. The rapid rise in demand for online consumption without physical contact is a prime example of this shift. Online platform-based markets have evolved into retail channels, allowing consumers to purchase both search goods and experience goods without contact. The platform provides an environment where customers can encounter a diverse range of customer-generated content (CGC) and gain insights into the purchasing experiences of others. However, despite the growing trading volume and diversification of products traded, relatively few studies exist on purchasing tangible experience goods in the online platform-based market. Therefore, this study investigates the impact of CGC (i.e., content and valence) on the market performance of experience goods, such as sales and sales rank in the platform-based market. We first examine the customer experience-related content in CGC in this market and then investigate the effect of CGC on market performance, such as sales and search ranks. We use crawled data from a platform that sells and rents artwork for empirical analysis. LDA topic modeling findings reveal that CGC has three primary topics (i.e., basic, artist, and style). The regression analysis results show that only style-related content improves performance, whereas basic-related content negatively affects search ranks. The valence of CGC does not significantly impact either performance measure. Additionally, we consider the role of rental services in this market and find that rental volume and search rank have an inverted U-shaped relationship. This study has important implications because it proposes a research framework and empirical model for examining the impact of CGC on performance in the online platform-based market for experience goods. It also has important managerial implications for platforms and sellers looking to enhance their market performance by monitoring CGC.     

Market Model-Based Channel Selection in B2B E-Commerce: Exploring a Buyer's Adoption Decisions

Companies that seek to exploit the cost advantages of business-to-business (B2B) e-Commerce face a variety of strategic options. By analyzing the demand and cost functions for sellers, intermediaries, and buyers, this research develops an economic framework that clarifies the relative advantages of four common B2B e-Commerce channels: private exchange, web-based procurement, public aggregation, and public exchange. This research focuses on addressing two important questions: (1) How does a buyer select a suitable B2B e-Commerce channel (or an e-Marketplace structure) given a variety of market conditions, different levels of product substitution, and a range of purchasing patterns? (2) How does a buyer successfully manage a B2B e-Commerce channel for gaining the highest transaction-level buyer surplus? The analytic and numeric results of our study show that a company's product offerings, the market conditions it faces, and the purchase patterns it implements are all important determinants in the selection of B2B e-Commerce setting. For custom products, private networks (such as the private exchange or web-based procurement models) are more attractive than the public aggregation or exchange models. However, taking market conditions and purchasing behavior into consideration, the web-based procurement model is more suitable for spot purchasing, while the public exchange model is more suitable for systematic purchasing and fragmented markets. On the other hand, the aggregation model is preferable in concentrated markets while the exchange model is more suitable in fragmented markets. These results provide important implications for industrial development of B2B e-Commerce.     

International trade in services: A portrait of importers and exporters

We provide a novel set of stylized facts on firms engaging in international trade in services, using unique data on firm-level exports and imports from the world's second largest services exporter, the United Kingdom (UK). We show that only a fraction of UK firms engage in international trade in services, that trade participation varies widely across industries and that service traders are different from non-traders in terms of size, productivity and other firm characteristics. We also provide detailed evidence on the trading patterns of service exporters and importers, such as the number of markets served, the value of exports and imports per market and the share of individual markets in overall sales. We interpret these facts in the light of existing theories of international trade in services and goods. Our results demonstrate that firm-level heterogeneity is a key feature of services trade. Also, we find many similarities between services and goods trade at the firm level and conclude that existing heterogeneous firm models for goods trade will be a good starting point for explaining trade in services as well.     

Fragmentation and complementarity: The case of EFPs

With the proliferation of alternative markets, concerns have arisen that they may induce lower liquidity on centralized exchanges. In futures markets, the use of an alternative trading mechanism known as exchange of futures for physicals (EFPs) has increased sharply in recent years. EFPs provide a means to obtain futures positions, coupled with offsetting cash positions, away from the centralized exchange. Traders use EFPs to ensure a desired price on complex packages of trades, thus avoiding the transactional risk (slippage) that is inherent in the centralized market. Theoretical analysis establishes that any detrimental effects of fragmenting the centralized market can be offset by traders' knowledge of another opportunity to trade without transactional risk. If EFPs attract more risk‐bearing capacity, there could even be a net benefit to the central market. An empirical analysis suggests that EFP trading is motivated by transactional risk because it represents a larger portion of total trading during periods of unusually high volatility when slippage is apt to be more of a problem. Consistent with the notion that alternative markets can be complementary to centralized exchanges, we find that EFP trading is not associated with reductions in market quality and may act as an outlet for extra volume when markets are under the most stress. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:697–727, 2002     

Exchange risk and asset returns: A theoretical and empirical study of an open economy asset pricing model

This study develops a consumption-based asset pricing model in which domestic consumers can buy goods from domestic and foreign markets but can only invest in domestic markets. In this model, the exchange rate influences asset prices through the marginal utility of consumption and increases the risks investors face. We find that our model can successfully price the 25 Fama–French portfolios and industry portfolios in the Chinese market, and the exchange rate is an important pricing factor in the unconditional linear model. We also find that the exchange risk is time-varying and countercyclical, which can help to explain the countercyclicality in equity premium.     

Analyzing price and product strategies with a comprehensive system dynamics model—A case study from the capital goods industry

Price reductions and/or product enhancements are widely seen as appropriate ways to increase market share. However, the key findings of this analysis demonstrate the opposite: decreases in price combined with product enhancements can lead to substantial loss in sales revenue and, ultimately, profit. The discussion draws on findings from a comprehensive system dynamics model, which has been developed in a major company in the capital goods industry. The purpose of this research is to analyze the price and product strategies in the capital goods industry. In the case company, testing intuitive beliefs with the help of a formal system dynamics model proved to be beneficial in the strategic decision-making process. The model had a significant impact on the case company, especially when challenging basic assumptions about mechanisms of markets and competition.     

The Effect of Delays in Information Exchange in Electronic Markets

In this research I explored the impact of information delays in a simple model of negotiation through an electronic market system. I found that a market can accurately reflect buyers' and sellers' preferences only if the rate of injection of price information multiplied by the rate of transfer of price information falls between 0 and 2. It is argued that markets adjust themselves to this constraint in practice. The alternatives are to experience chaotic and catastrophic volatility in prices or to go out of operation. Thus, electronic commerce can provide value beyond merely speeding up operations and increasing capacity. It also helps avoid misleading behavior by both buyer and seller and allows markets to operate in a wider range of trading environments.     

Used goods, not used bads: Profitable secondary market sales for a durable goods channel

The existing literature on channel coordination typically models markets where used goods are not sold, or are sold outside the standard channel. However, retailers routinely sell used goods for a profit in markets like textbooks. Further, such markets are characterized by a renewable consumer population over time, rather than the static consumer population often assumed in prior literature. We show that accounting for these market characteristics alters the optimal contract form as compared to the contracts derived in prior research. In particular, when new goods are sold in both the first and second periods of our model, the optimal contract differs from those in prior literature in that it can exhibit a negative fixed fee in the second period and requires contracting over the resale price in the second period. The model shows that the manufacturer makes higher profits from allowing used-good sales alongside new-good sales than from shutting down the retailer-profitable secondary market, and that unit sales expand with a profitable secondary market over those achievable without a secondary market. Furthermore, in contrast to previous investigations of durable goods markets that ignore the possibility of a retailer-profitable secondary market, we show conditions under which the manufacturer would optimally choose to sell no new goods in the second period, ceding the market entirely to the used-goods retailer. This research thus expands our knowledge of how durable goods markets work by incorporating the profitable operation of a retailer-run resale market.

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A Comparison of Bundling and Sequential Pricing in Competitive Markets: Experimental Evidence

Technological advances enable sellers to identify relationships among offered goods. Sellers can leverage this information through pricing strategies such as bundling and sequential pricing. While these strategies have primarily been studied under monopoly assumptions, the strategies are available to competitive firms as well. This paper reports on a series of laboratory experiments comparing bundling and sequential pricing while varying the underlying relationship between the goods in markets where a fraction of buyers comparison shop. The results indicate that sequential pricing is generally as profitable to the seller; however, there is evidence that sequential pricing may be more harmful to consumers than bundling when the goods have complementary values or the buyer’s values are positively correlated.     

Growth-cycle decomposition diffusion model

The diffusion model has been widely used to explain the S-shaped cumulative growth of markets for retail service and consumer durable goods. In many situations, sales fluctuate because of both growth of innovation diffusion and transitory changes in an external factor, called cycle. The traditional diffusion model, however, cannot distinguish between the two. We develop the growth-cycle decomposition diffusion model to distinguish the growth from the cycle, where the cycle incorporates a few external variables determining the transitory sales environment. The proposed model is applied to estimating the diffusion process for the annual sales of room air conditioners in Korea.     

The evolution of trading activity in Asian foreign exchange markets

We exploit previously unpublished data on foreign exchange turnover to analyse the institutional setting in which the currencies of non-Japan Asia are traded. Volumes grew rapidly between 2004 and 2007 and the diversity of market participants increased. Nevertheless, liquidity is undermined by foreign exchange controls. For Asian currencies other than JPY, HKD and SGD, non-residents account for a relatively small share of activity and FX swap markets are still in their infancy. Offshore non-deliverable markets have developed in response to controls, causing segmentation in trading activity. Furthermore, Herstatt risk remains high in Asian foreign exchange markets.     

Electronic Call Market for Commodity Transactions: Design of Computer-Mediated Order Matching System

Commodity exchanges provide potential market structures for electronic trading because commodity products have relatively simple and well-standardized product attributes. Most existing electronic trading systems are introduced for financial exchanges, where qualities of traded products (such as stocks and bonds) are homogeneous, thus taking into account only bid and offer prices for computer-mediated order matching. However, a single commodity market, such as the cotton or grain market, is made up of many heterogeneous goods that are similar to each other but have different product qualities and contract terms. In addition to the price, commodity traders have other pertinent preference ranges over product attributes and delivery conditions. We delineate an electronic call market system for commodity trading, which optimizes the realization of traders' utilities over extended product attributes beyond the price. The electronic call market not only maximizes the total surplus of market participants based on bid and ask prices but also satisfies their qualitative preferences over other attributes, which are difficult to include in the quantitative prices. The trading mechanism of the electronic call market integrates an economic auction model with a social choice model to produce a Pareto-improved transaction. Market simulations are conducted to validate the performance of the proposed electronic call market. The order matching system of the electronic call market is implemented using constraint logic programming.     

Probabilistic selling vs. markdown selling: Price discrimination and management of demand uncertainty in retailing

Markdown selling (i.e., price reductions over the course of the selling season) is a strategy to implement price discrimination and to manage market uncertainty that has been widely adopted by retailers. This paper explores the potential advantage of introducing an additional tool to the arsenal of retailers, probabilistic selling (i.e., offering consumers a choice to buy a product that can turn out to be any item from a predetermined set of distinct items). We show that both probabilistic and markdown selling strategies serve as price discrimination tools by offering buyers an option to purchase a “damaged” good (an uncertain product under the former and delayed consumption of a product under the latter). However, the two strategies segment markets based on different types of buyer heterogeneity: buyer preference strength under probabilistic selling and buyer patience under markdown selling. Our analytical model reveals that, compared with markdown selling, probabilistic selling can (1) improve margin management by increasing revenue from full-price sales and reducing the magnitude of discounts; and (2) improve inventory utilization by reducing stockouts and the amount of excess inventory. We identify the conditions required for probabilistic selling to be more profitable than markdown selling.     

Retail pricing and clearance sales: the multiple product case

This paper deals with the phenomenon of clearance sales of fashion type goods which have an intertemporal aspect similar to durable goods. Using the Van Praag and Bode (1992) model, the case of clearance sales in a store selling more than one commodity is analyzed. Conditions and rules of thumb are shown in which it is optimal to increase the price of one product while decreasing the price of another. A linear demand model and a numerical example are presented, showing that the price of one product decreases while the price of the other product may increase or decrease in different periods.     

近代上海国际贸易中心的形成及其启示

上海成为国际贸易中心,经历了起步、形成、巩固3个阶段,形成的主要原因在于其得天独厚的自然条件、悠久的对外贸易传统、专门人才和贸易主体的"集聚效应"、内外贸易的一体运作带来的两个市场资源集中配置、完善健全的服务体系和适于创业的社会环境等。对外贸易推动了近代上海经济和城市的发展,使上海成为全国的商品集散地、金融中心、航运中心、工业中心。今天上海重建国际贸易中心,必须要有内外贸易的共同发展;要有广阔的经济腹地,与周边城市群建立共同发展的联动机制;要有相关行业的均衡发展;要有开放的促进贸易的社会和制度环境。